Explanatory Memorandum
(Circulated by the authority of the Assistant Treasurer,Senator the Hon Jim Short)Chapter 3 Electing for employer withholding not to apply
Overview
3.1 Items 29 to 38 of Schedule 1 of the Bill will amend the Child Support (Registration and Collection) Act 1988 (the Registration and Collection Act) to enable parents paying child support to elect to pay directly to the Registrar. The Registrar will accept an election where he is satisfied that the payer is likely to make timely payments.
3.2 The amendments will provide for the Registrar to require an employer to withhold child support from a person's salary and wages if the payer fails to make timely payments.
3.3 The amendments will also change the terminology used to describe the action of withholding amounts from a payer's salary and wages from the term 'automatic withholding' to the term 'employer withholding'.
3.4 The proposed amendments also seek to replace the terms 'regular and timely' with the term 'timely'.
Summary of the amendments
3.5 The proposed amendments will:
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- reduce the level of intrusiveness of the child support scheme for payers who make timely child support payments direct to the Registrar
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- provide greater flexibility to the Registrar in the way he administers the collection of child support and, by encouraging voluntary compliance, reduce administration costs over time
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- reduce employers costs of compliance wherever possible
3.6 On the 28th day after the day on which the Act receives the Royal Assent.
Background to the legislation
3.7 Where the payee does not elect to receive child support payments privately from the payer, they are collected by the Registrar. The Registration and Collection Act provides the legislative framework for the collection activities of the Registrar.
3.8 Section 43 provides a general rule of collection by withholding in the case of employees wherever practicable. This collection method was seen as one of the prime means of overcoming the difficulties in enforcing collection of child support. The term 'automatic' which was used in connection with the word 'withholding' was intended to reinforce this.
3.9 Section 44 currently sets out the cases in which withholding is not applicable. The limited situations in which withholding does not apply are:
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- The paying parent's liability arose before the commencement of the Registration and Collection Act (that is, prior to 1 June 1998) [Subsections44(1) and 44(1A)]
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- The Court has, in maintenance proceedings ordered that employer withholding is not to apply either because of special circumstances relating to privacy or pending the disposal of proceedings before the court [Subsections 44(2), (3) and (4)]
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- The Registrar is satisfied that in the particular circumstances of the case that withholding is not an efficient method of collection [Subsection44(6)]
3.10 The Joint Select Committee on Family Law Matters, in its examination of the Child Support Scheme, found that community attitudes towards paying child support had changed significantly. The Commmittee considered that it was time that the level of intrusiveness of the scheme be minimised and that parents should be given a choice in deciding the means by which they pay their child support liability. The Committee was of the view that this would avoid unnecessary disclosure of a paying parent's personal information to third parties such as employers and offer an incentive to parents paying child support to comply voluntarily with their child support obligations (Recommendations 55, 56 and 57).
Explanation of proposed amendments
3.11 For many parents paying child support, employer withholding is a convenient way to meet their child support obligations. However, the proposed amendments give effect to the recommendations of the Committee to provide payers with a choice of how to pay their child support. The proposed amendments will also provide safeguards to ensure that the collection of child support is not put at an unreasonable risk. The level of intrusiveness of the scheme will depend on the paying parent's voluntary compliance with his or her child support obligations.
Who has the right to make an election?
3.12 The right of a payer to make an election, is intended to apply to existing payers who have a liability registered for collection with the Registrar and to payers who will be registered in the future. [Item 32 - new subsection 44(1) and (2)]
3.13 The proposed amendments will give all payers a new right. The existing right to apply to a court on very limited grounds would no longer be necessary. The main benefits of the proposed rights over the limited existing rights are:
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- the right applies to more payers
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- there are reduced costs because the payer does not have to go to court to apply for this right.
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- there is no longer a requirement for an election to be lodged within 28 days of registration of the liability
3.14 The proposed amendments will affect the following rights of some payers:
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- the right to elect that withholding is not to apply, where the liability arose before the commencement of the Act (that is prior to 1 June 1988)
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- the right to seek an order from a court that withholding is not to apply either because of special circumstances relating to privacy or pending the disposal of proceedings before the court
3.15 The election will be made to the Registrar on an approved form. [Item 32 - new subsection subsection 44(3)]
Discretion of the Registrar to accept or refuse an election
3.16 The Registrar will need to satisfy himself that the payer will make timely payments. The factors which will be taken into account by the Registrar in arriving at his decision will be set out in a policy guideline by the Registrar after carrying out community consultation.
3.17 If he is satisfied, then he will make the necessary statements or adjustments to the Child Support Register to reflect that employer withholding is not to apply. However, if he is not satisfied he will refuse to make the necessary statements or adjustments to the Child Support Register. In such circumstances, the payer will have the right to have this decision reviewed (both administratively and judicially through the existing review rights).
What if the payer subsequently defaults?
3.18 In the event that a payer defaults the Registrar will have the power to require that the payer's employer commence to withhold child support. [Items 33 and 35 - new subsections 44(5) and (7) respectively]
3.19 The Registrar must vary the particulars in the Child Support Register to state that employer withholding is to apply unless he is satisfied that the collection of payments using this method is not an efficient method of collection or that the default was an isolated incident and the payer is likely to make timely payments. [Items 33 and 35 - new subsections 44(5A) and (7A) respectively]
3.20 If the Registrar decides to vary the particulars in the Child Support Register so that employer withholding applies in relation to the liability, then the payer will not be able to lodge another election for a period of 6 months from the date the Registrar made the variation. The reason for this restriction is that in the event of a default by the payer, the Registrar needs to provide some level of assurance of continuity of payments to persons receiving child support.
3.21 The Registrar is responsible for ensuring the collection of child support payments in a timely manner and is conscious that the implications for children where a payer defaults are often severe. Accordingly, the Registrar will require that 6 months must elapse (during which time employer withholding has taken place) before he will consider another application to elect that employer withholding should not apply. [Items 35 - new subsections 44(7B)]
What restrictions are there on making a subsequent election?
3.22 It is necessary to limit the number of times that a person may make an election to ensure the efficient administration of the Child Support Scheme. A limit of once every two months provides a reasonable balance between the needs of payers and the need to ensure efficient administration of the Child Support Scheme. This also represents a reasonable period within which circumstances may have changed sufficiently to warrant a fresh look at the payer's circumstances (For example there is a two month restriction in lodging income estimates elections). [Items 35 - new subsections 44(7C)]
Change 'automatic' withholding to 'employer' withholding
3.23 The proposed amendments of terminology from 'automatic' to 'employer' withholding reflect the fact that withholding will no longer be automatic and that payers will have more opportunity to pay direct to the Registrar. It also reflects the responsibilities of employers in withholding payments. [Item 29 - amended paragraph 26(2)(b), Item 30 - repeal heading and substitute new; Item 31 -amended section 43(2), Item 34, 36 and 38 - amended subsection 44(6), subsection 44(8) and subsection 44(10) respectively]
Change 'regular and timely' to timely
3.24 The proposed amendments seek to replace the terms 'regular and timely' with the term 'timely'. The term 'timely' is considered to mean payment of the full amount payable on time by the due date, therefore the word 'regular' is considered to be superfluous in this context. The term 'timely' has been reflected in all the new provisions. The words 'regular and' have been omitted from sections which have merely been amended. [Item 37 - amended subsection 44(9)]